Winds of change in retail industry

The retail industry is entering into a period of major transformation. In addition to traditional entities such as department stores, supermarkets and convenience stores, new retail business forms are emerging, including mega shopping mall developments led by real estate companies and JR train terminals being turned into retail centers.

Given that Japan’s domestic market will inevitably shrink as the population declines, retail businesses need to generate innovative ideas and services to survive the competition. They must strive to meet the diversifying needs of consumers — ranging from elderly couples to single-member households.

Forty years after the first full-scale convenience store chain was established in Japan, convenience stores are the most familiar retail outlet for many consumers and there are 50,000 nationwide. There is a view that the number of convenience stores has reached its limit given their ubiquitous presence in large cities. But operators of such chains remain aggressive in their expansion. Some of them are pushing tie-ups with companies from other sectors. FamilyMart, for example, is developing business ties with agricultural cooperatives, pharmacies, restaurant chains and karaoke bars in its attempt to open “conglo-retail” shops. Seven-Eleven Japan has allied with West Japan Railway Co., and hopes to place kiosks and convenience stores operating in railway stations in the Hokuriku, Kinki and Chugoku regions under its fold. Seven & i Holdings chairman Toshifumi Suzuki is confident that the number of convenience stores in Tokyo has not yet reached a saturation point. Seven & i Holdings plans to open more stores in rural parts of the country as well.

Supermarket chains, which traditionally feature large-scale stores, are on the defensive in the competition with convenience stores. But now they are starting to increase the number of small-scale shops in city centers.

All retail businesses must strive to increase the level of customer convenience. They need to shorten the time needed for shopping as well as consider offering home delivery of customer purchases, especially in light of the growing ranks of households composed of elderly people.

Younger consumers increasingly rely on Internet portals like Rakuten and Amazon to satisfy their shopping needs. The retail industry must learn how to make traditional stores, which play a key role in local communities, more competitive. The concept of “omni-channel” retailing, which integrates the services of traditional stores and Internet shopping, may offer the industry a new direction. Customers can order products online if they wish and receive them at a variety of locations.

Given the fierce competition among retail chains, whether such services can become widespread will depend the successful establishment of well-functioning systems that can rapidly procure and deliver ordered products.